The long-running debate over Sweden’s price-area structure reignited in May. The country's government wants to reduce the number of price areas from the current four preferably down to just one, which would impact prices throughout the Nordics.
The long-running debate over Sweden’s price-area structure reignited in May. The country's government wants to reduce the number of price areas from the current four preferably down to just one, which would impact prices throughout the Nordics.
The current price areas in the Nordics have been in place for years; Sweden’s four-area structure, in particular, has been in effect for nearly 15 years. In 2011, Sweden was split into four geographical price areas, each with its own electricity pricing. Since then, Swedes have adapted to a reality where electricity prices in the south are significantly higher than those in the north, a situation that may soon change.
One of the big news stories in the Nordic electricity market in May was that the Swedish government, led by Energy Minister Ebba Busch, announced its goal to change the country's price areas and, as such, has commissioned the TSO, Svenska Kraftnät, to look at how best to achieve a new structure. The TSO is to submit a report to the government within a year on what a new structure could look like.
Ebba Busch presented the plans at a press conference on 15 May, which took place in the wake of a joint EU report co-written by Svenska Kraftnät that stated that there was no need to change the existing price areas in Sweden. Nonetheless, the report was met with anger, especially in southern Sweden, and the government subsequently decided to go it alone, bypassing the EU in its efforts to change the current structure. The Swedish government’s proposal was then backed by Svenska Kraftnät, which had stated in April that a structural change would be required within 5-10 years due to shifting production and consumption patterns across the country – both now and in the future. However, the EU report in question did not take this into account and so did not end with a recommendation to change the current four Swedish price areas.
The debate over Sweden’s price-area structure has resurfaced regularly over the years, with growing criticism of the current model, particularly because it generates significant price disparities between the high-production north and the consumption-heavy south.
Thus, the average electricity price so far in 2025 has been around 14 EUR/MWh in both SE1 and SE2, covering the northern Swedish areas, around 48 EUR/MWh in the SE3 area (central Sweden around Stockholm) and around 63 EUR/MWh in SE4 (southernmost Sweden around Malmö).
The Swedish government has tasked Svenska Kraftnät with exploring various structural alternatives, including reducing the number of price areas to two – or potentially reverting to a single national price area. The government's preferred outcome is a return to a unified price area. If implemented, this would mark a major shift – especially for consumers in Malmö, who have so far paid more than four times as much for electricity as those in Sundsvall.
A more uniform electricity price and fairer conditions for businesses across Sweden were key arguments made by Ebba Busch when she unveiled the government’s plan.
According to the government, one of Sweden’s core challenges is that while the south has a strong grid but limited production, the north has abundant generation capacity but weaker grid capacity. The Swedish government believes that these structural issues are undermining the country’s competitive edge and hindering progress on key energy policy goals, including commitments tied to NATO membership, which Sweden formalised in 2024.
Since last autumn, the introduction of the new calculation system for Nordic electricity prices, the so-called flow-based market coupling, also seems to have contributed to increasing price disparities in Sweden.
Our calculations indicate that, all else being equal, SE4 is now facing higher prices under the new system compared to the previous model, while other areas, such as Denmark and Finland, appear to benefit.
All four Nordic TSOs, including Svenska Kraftnät, agreed to switch to flow-based market coupling, but it has been clear that the model has resulted in higher electricity prices in southern Sweden in the first six months since its launch.
According to Ebba Busch, the proposal to make Sweden a single price area has the support of all three current governing parties and the Sweden Democrats. Nevertheless, political support remains fragile. Without backing from additional parties, the four aligned groups hold only a narrow majority in the Riksdag, meaning such a major electricity market reform could be years away, possibly spanning multiple election cycles.
A change as extensive as moving from four price areas to one will no doubt have a major impact on electricity prices in Sweden. The exact effect is hard to predict, but what is clear is that prices will fall in the current SE3 and SE4 price areas, while SE1 and SE2 can expect price increases. However, the effect will clearly be limited by the insufficient cables that will restrict the export of electricity from north to south, even with a single Swedish price area, so prices will not just be a simple average of the current levels in the four respective existing price areas. This means that Sweden faces a major task in expanding its internal grid. As part of the transition to a single price area, Svenska Kraftnät must submit a report to the government within just a few months on how to strengthen the country's transmission network.
The way the electricity market is structured, with transmission cables not only internally between the respective price areas in a given country, but also between different countries, a proposal as far-reaching as moving to one common Swedish price area could also have a significant effect on the rest of the Nordics. As prices are expected to rise in the north and fall in the south, the effect of the current market situation would therefore be bearish on Denmark, where DK1 has a cable across Kattegat to SE3, while DK2 has a cable across Øresund to SE4. Here too, limited cable capacity will cap the impact, but power flows are expected to shift even further westwards, with exports from Sweden to Denmark.
The situation is different in Finland, where cables to Sweden currently run to the northern and therefore cheaper price areas. The current SE1 has a cable to Finland, where prices are generally higher and look set to continue as such in the years to come. Given the current conditions, a single Swedish price area would result in higher electricity prices in Finland. While electricity prices in northern Sweden and northern Norway remain relatively aligned, the broader expectation is that any change to Sweden’s price-area structure will ripple across the Nordics.
However, it is far from certain that the price dynamics will play out as expected.
By the time Sweden could realistically transition from four price areas to one, the broader energy landscape in the Nordics could look very different.
For example, Norway is considering stopping the construction of new international cables, including the two cables to Denmark that are due to be replaced in the coming years. Meanwhile, factors such as wind and solar expansion, not just in the Nordics but across Northern Europe, and uncertainty surrounding Baltic Sea infrastructure, could significantly reshape electricity flows between the Nordics and the rest of Europe over the next 5-10 years.
The key question is whether Svenska Kraftnät will recommend merging Sweden into a single price area or opt for a less radical approach, such as reducing the current four areas to three or two, in its report due next year. This structure could be achieved by merging the current SE1 and SE2 into one price areas and possibly SE3 and SE4 into another.
Either way, Sweden’s political landscape will probably look different by the time a final decision on the price-area structure is made, and the question remains whether a future Social Democrat-led government will pursue another course or scrap the plans introduced by the current centre-right coalition only last month. The next parliamentary elections are scheduled for autumn 2026, a few months after Svenska Kraftnät is scheduled to deliver its report. The timing makes it likely that price areas could become a hot election topic.
